Aug. 27 (Bloomberg) -- Swiss National Bank President Thomas
Jordan said policy makers may ask for the activation of the so-called countercyclical capital buffer to stem developments in
the mortgage and real-estate markets in 2013 at the earliest.

“We can activate it at any time, respectively make a
request,” Jordan told Swiss television station SF in an
interview today. “We’re closely observing the situation on the
property and mortgage markets, and we’ll regularly assess
whether there’s a need to make a request for activation. It has
to be expected that it will only be the case in 2013.”

Under the measure introduced in July, the Swiss government
can force lenders to hold additional capital of as much as 2.5
percent of their domestic risk-weighted assets to counter
threats to financial stability following an SNB request. While
the Zurich-based central bank said in a statement today that
there were “some indications of a possible slowdown” in the
second quarter of the “exceptionally strong” momentum in the
domestic residential mortgage and real-estate markets, Jordan
called the situation still “tense.”

The decision not to ask for activation of the buffer
“should not be interpreted as an all-clear,” the SNB said.
“Interest rates are still exceptionally low and there are signs
of high risk appetite in mortgage lending. As a consequence, the
risk of a further buildup of imbalances and the associated risks
to financial stability remain high.”

Apartment Costs

In its June Financial Stability Report, the SNB said the
mortgage market poses a significant risk to lenders. Home loans
have increased by almost 300 billion francs ($313 billion) in a
decade and gained 5.2 percent last year to 797.8 billion francs.
That’s about 140 percent of Swiss gross domestic product.

The cost of owner-occupied apartments with as many as five
rooms has risen the most in the past 10 years, with prices
jumping 40 percent, SNB data show. Prices of rental apartments
have climbed 29 percent.

UBS AG and Credit Suisse Group AG, Switzerland’s two
biggest banks, had combined outstanding mortgages of 240.6
billion francs at the end of 2011, up 2.8 percent from the
previous year. Cantonal banks, which are largely owned by the
regions, had a 6 percent increase, while the cooperative-based
Raiffeisen banks saw mortgages surge 7.4 percent.

Happy Banks?

Jordan, 49, said “banks are very much aware that there are
risks in this situation.” He also said “it’s not our
motivation whether banks are happy or whether they’re unhappy;
we’re observing this market and if it makes sense from an
macroeconomic perspective, we’ll make a request. At the moment,
we came to the conviction that it’s better to wait.”

The SNB will assess the impact of government measures aimed
at curbing credit supply before making a decision, he said.

The government toughened lending rules last month, forcing
borrowers to provide at least 10 percent of the value of the
property from their own funds without using pension assets.
Under the measures, mortgages will have to be paid down to two-thirds of the lending value within 20 years.

The “measures are intended to have a damping effect on
real-estate prices and mortgage-market momentum,” the SNB said.
“The SNB will regularly reassess the need to activate the
countercyclical capital buffer.”